Which of the following is an example of a subsequent event that requires disclosure in the notes to the financial statements (but not adjustments to the financial statements)?

Multiple Choice

The entity completes an environmental cleanup. The liability for the clean-up was recorded as a contingent liability at the balance sheet date.


An event that confirms the auditors belief that a large portion of the entitys inventory is obsolete. The issue was documented prior to the end of the fiscal year and appropriate inventory adjustments were made at the balance sheet date.


A chemical explosion at a customers warehouse causes all accounts receivable from that customer to be uncollectible.


An entitys customer, who has been experiencing financial difficulty for several months, declares bankruptcy. The customer is one of over 1000 customers of the entity and appropriate reserves for any related accounts receivable have been properly maintained.

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